TORONTO - The Canadian dollar closed higher Tuesday, supported by strong gains in commodity prices as traders looked to central banks to take action to keep the fragile global economic recovery on track.

Prices for oil and metals also ran ahead following a strong report on U.S. factory orders.

The loonie rose 0.55 of a cent to 98.77 cents US from the close on Friday before the Canada Day holiday.

The U.S. Commerce Department said factory orders increased 0.7 per cent in May after two consecutive months of declines. Core capital goods, such as machinery and computers, rose 2.1 per cent. That’s better than the 1.6 per cent estimated in a preliminary report a week ago and is a good measure of companies’ plans to invest.

However, manufacturing has slowed so far this year, hurt by declining consumer and business confidence and weaker global demand.

Some analysts expect the European Central Bank to cut lending rates by 0.25 of a point later this week and the Bank of England to boost money in circulation. There are also hopes that Japan and China will announce new stimulus measures.

Hopes for central bank action helped push the August crude contract on the New York Mercantile Exchange up $3.91 to US$87.66 a barrel.

But the rise also reflected worries about Iran after the country staged further missile tests Monday, a day after U.S. and European embargoes of Iranian oil took effect. Iran also again threatened to block a critical Persian Gulf shipping route in response to the embargo.

The August crude contract on the New York Mercantile Exchange ran ahead $3.91 to US$87.66 a barrel.